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Columbia County surprised by tax breaks for new pulp mill

By Andy Schwartz, Walla Walla Union-Bulletin
Published: June 9, 2018, 6:00am

DAYTON — Somewhere communication has broken down between the state and Columbia County officials.

Columbia County commissioners were dismayed — and surprised — to learn in recent weeks that the cash-strapped jurisdiction will not receive anytime soon the significant sales and use taxes it was expecting from the Columbia Pulp plant construction project near Starbuck.

In fact, according to the state Department of Revenue, Columbia Pulp may never have to pay any sales or use tax on the project at all.

County commissioners learned at their Monday meeting that, unbeknownst to them, the state had approved the project for a tax deferral via the Tax Deferrals for High Unemployment County program Sept. 4, 2014.

This could mean more than $500,000 in lost revenue for Columbia County, which has a sales and use tax rate of 1.7 percent.

Local Angle

The experimental pulp mill is being developed with a $32 million investment by Columbia Ventures, a Vancouver-based venture capital firm. To read more about the firm: www.columbian.com/news/2018/mar/04/columbia-ventures-vancouver/

The deferral, which ultimately could operate as a total tax exemption, covers $10.8 million in construction costs, according to Columbia Pulp’s application to the state.

Columbia Pulp is also eligible for the manufacturer sales and use tax exemption, which covers the rest of its construction and machinery expenses. The deferral application suggested these amounted to roughly $25 million.

Boon expected

Columbia Pulp, which aims to pioneer new technology to turn straw into pulp for paper products, promises to be an employment and tax boon for the county.

County officials were not notified by either the state or Columbia Pulp that they would not be receiving sale and use taxes they were expecting. They only found out about the exemptions when county Treasurer Audrey McLean contacted Columbia Pulp in recent months to determine why her office was not receiving sales tax revenue from the ongoing construction project.

McLean told the U-B that she first expected to be receiving sales and use tax revenue in December, because typically roughly two months transpire between when the taxes are initially reported and when money actually arrives in county coffers. Columbia Pulp broke ground on the project in September 2017.

McLean said she did not look into the issue until March, because the county was switching accounting systems. She has been trying to get questions answered since.

No notification

McLean asked the Department of Revenue whether the state typically contacts counties whose tax revenue are affected by state program policies. Email records reviewed by the U-B show a state official responded that the department does not send notifications to jurisdictions regarding deferrals.

“Why doesn’t the state feel it is their obligation to let us know what’s going on?” asked commission Chairman Norm Passmore. His question was rhetorical as no state official was present for the county meeting Monday.

In fact, confusion remained during the county meeting as to the nature of the deferral specifically, which discussion suggested was likely to begin being paid off two calendar years after the project was completed.

This would mean that if the Columbia Pulp project is completed in November of this year, it would pay 10 percent of the deferred tax in 2021; 15 percent in 2022, which would be the second repayment year; 20 percent in the third year; 25 percent in the fourth year; and 30 percent in the fifth year — all adding up to 100 percent being paid in full by 2026.

But the Department of Revenue told the U-B that, in fact, the deferral program works almost in reverse of that. Despite its name, the program is actually a waiver program, said Debi Brower, who works in the state revenue department’s tax deferral program.

According to Brower, as long as Columbia Pulp continues its manufacturing operation and completes an annual survey and report to the state’s specifications, it will owe progressively less and less on the construction sales and use taxes it accrued until, by the eighth year after the project is complete, its debts will be wiped clean.

For example, she said, if Columbia Pulp’s project is operationally complete before the end of 2018, and it meets state requirements until Jan. 1, 2026, the company would not have to ever pay the sales and use taxes on its construction project to either the state or the county.

“The county is not going to get any money back unless they (Columbia Pulp) do something that does not meet requirements of the deferral,” said Brower.

One among other lingering questions from Monday’s commissioner meeting concerned whether the state currently regarded Columbia County as a high-unemployment county. High-unemployment counties, according to the state, have an unemployment rate of 20 percent or more above the state average and are qualified for the deferral program in question under RCW 86.20.

On, off list

The county has oscillated on and off the list since 2010. It was removed from the list between July 1, 2016 and June 30, 2018. Columbia Pulp was able to get the tax deferral certificate because it was granted in a period of 2014 when Columbia County was still on the qualifying counties list.

Columbia County will return to the state’s list of qualifying counties again on July 1.

Property taxes to come from Columbia Pulp — the other major source of revenue the county expects from the business — remain unclear.

County Assessor Chris Mills said she is bringing in an assessor from the state to assess the property, which is beyond her training.

She said that by fall county officials will have a better sense of what sort of property tax revenue to expect in the coming years from the plant.

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